Case o

1. Managing and Sustaining Profitable Growth Group Presentation :
Procter & Gamble : Organization 2005 (A)
Haris Suhendra 1140003494 | Pramita Wardani 1140003121
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2. Table of Contents:
About Procter & Gamble
Problems
Business Analysis
Recommendation
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3. From Candle and Soap to multinational empire
Founded in Cincinnati, Ohio by William Procter and James Gamble.
Differentiation of P&G is an aggressive investment strategy building a large factory in the 1850s despite rumors of
impending civil wars. Keywords for P&G : Rapid growth, innovations in HR managements, R&D, Distributions, Marketing
and organizational designs.
About Procter and Gamble | P&G History 3

4. Procter and Gamble Net Sales, 1985-2000
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5. Procter and Gamble Share Price History, 1997-2000
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6. About Procter and Gamble | The Organizational Structure Changes
Organizational Structure:
(1948-1987)
• Two different models for
US and Europe were
adopted, as US market
was more homogenous, a
nationwide brand and
product division
management was
adopted.
• Western Europe is a
heterogeneous market
with different languages,
culture and laws therefore
a decentralized model was
adopted.
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7. About Procter and Gamble | The Organizational Structure Changes
United States
The organizational model was developed
on two key dimensions: functions and
brand.
In 1987 structure was changed and
functional units were centralized.
Europe
P&G organizational model developed
along three key dimensions:
Geography , function , brand. In 1963 ,
the European Technical Center (ETC) in
Brussels was establish to act as
centralized R&D and process-
engineering unit.
Problems in Europe: Corporate R&D were completely disconnected from US operations.
European functional organizations were also in isolation from US counterparts. Un
standardized , sub-scale production was expensive and unreliable. Country R&D were
expensive to maintain.
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8. About Procter and Gamble | The Organizational Structure Changes
Global Matrix
• In late 1980s, expansion opportunities
in Japan and other parts of world led
P&G to develop globalization model.
Corporate functions in Brussels still
lacked direct control of country
functional activities. P&G started
migrating to a global matrix structure,
country functions were consolidated
into continental functions reporting
through functional leadership and
direct reporting through the regional
business manager.
• In 1995 this structure was extended to
rest of the world through creation of
four regions – North America , Latin
America , Europe /Middle East/Africa
and Asia.
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9. About Procter and Gamble | The Organizational Structure Changes
Global Matrix Problems
• Most functions nominally had straight line reporting through regional
management and also reporting through functional management, the function
retained a high degree of de-facto control.
• They develop their own strategic agenda, maximize power, do not coordinate
with other functions and business units.
• As regional managers were responsible for profit and loss they were hesitate to
launch new product.
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10. About Procter and Gamble | The Organizational Structure Changes
Organization 2005
• Introduced by Durk Jager as an aggressive restructuring program
• Designed to generate bolder innovations and accelerate their global rollout in
order to double P&G sales to 70billion in 2005 and achieve annual earning
growth of 13-15%
• P&G chain of formal command was based on Geographical, Product, Function.
It changed to : product, geography, business process
• The Plan also called to eliminate 6 management layers, reducing from 13 to 7
• Focus was more on rolling out new products at faster rate. Implementation of
3M concept i.e product launched in last 3 year should make up certain
percentage of total turnover.
• Previously organization was more decentralized and centralization coupled
with separations and negative growth rate has weaken moral of employees
• Jager decided that P&G would sell its products under the same name all
around the world. So in Germany, the name of its dishwashing liquid suddenly
changed from Fairy to Dawn
• Large level of transfers (2000 from Europe to Geneva ) and relocation led to
moral and behavioral changes.
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11. Situation (2)
Standardization of Work Processes
• One of the major objectives of Organization 2005 program was to
significantly improve all inefficient work processes of P&G including its
product development, supply chain management and marketing
functions.
• In order to achieve this objective, P&G undertook several IT initiatives
including collaborative technologies, B2C e-commerce, web-enabled
supply chain and a data warehouse project for supplying timely data to
company’s various operations located globally.
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12. Revamping the Corporate Culture
• The Organization 2005 program made
efforts to change P&G from :
conservative, modern, quick-moving
lethargic and and internet-savvy
bureaucratic organization.
• The new structure was directed
towards revamping the work culture of
P&G so as to focus on its new Stretch,
Innovation and Speed (SIS) philosophy.
Emphasizing on innovation, Jager said,
“Organization 2005 is focused on one
thing: leveraging P&G’s innovative
capability.
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13. About Procter and Gamble | The Organizational Structure Changes
Dismantling matrix organization and replacing with interdependent organizations:
• Global Business Units (GBUs) focus solely on consumers, brands and
competitors around the world. They are responsible for the innovation
pipeline, profitability and shareholder returns.
• Market Development Organizations (MDOs) are charged with
knowing consumers and retailers in each market where P&G competes
and integrating the innovations flowing from the GBUs into business
plans that work in each country.
• Global Business Services (GBS) utilizes P&G talent and expert
partners to provide best-in-class business support services at the
lowest possible costs to leverage P&G’s scale for a winning advantage.
• Lean Corporate Functions ensure ongoing functional innovation and
capability improvement.
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14. About Procter and Gamble | The Organizational Structure Changes
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15. Problems
Problems
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16. Problems
Durk Jager , had introduced a restructuring program named “Organization 2005” –
designed to accelerate sales and innovations. In past P&G chain of formal
command put geography first, followed by product and function.
In new design, P&G was structured as 3 interdependent global organizations, one
organized by product category, one by geography and one by business process.
Problems
• Missed Earnings in 2000
• In the fourth-quarter profits were flat against the expectation 15-17%
increase
• P&G lowered its future quarterly sales growth estimates to 2-3%
• P&G Stock lost 7%, falling to $57 after the announcement
• Loss of US market share in 16 out of 30 categories
• Lack of immediate results, job reductions, reduced employee morale led to
reduced profits and stock price reduced to half in last six months.
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17. Business Analysis
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18. Strength Weakness
 The corporate ability to create new • Organization 2005 affected human
strategy resources and overall employment
 Prompts organizational as there is massive transfer of
workforce to work on innovations employees to various countries
and competitive advantage; that resulted to the difficulty of
 Strong global brand adapting to changes.
• The confrontational management
style of Jager and failure to
conduct more intensive research
SWOT Matrix
Opportunities Strength – Opportunity
and development
Weakness – Opportunity
• integration of information  Expand the business to  Campaign about the new CEO.
technology another country  Build Leadership Strategy
• the strategic arrangement of
 The product could be globally  Campaign about value of the
organizational structure into
business units with five key standardize, but it must P&G product
elements contains local taste in their
• expand its operations and even products development
potential business cooperation
Threats Strength – Threats Weakness – Threats
• The inability to handle change  Innovation in technology for • Must create a good corporate
management efficiency culture phase by phase
• the unprecedented business
 Create a good customer • Corporate must have a good
trends and rapid competition
service and communication to communication and the 18
their customers executives must support all
employees 18

19. Recommendations
Not just strategy but Organization
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20. Recommendation - To ensure the success out change program “organization 2005”
Building an organization with the
competences, capabilities, and resource
strengths to execute strategy successfully.
• The key to success full transformation is
employee buy in.
• Proactive two way communication is the
key to achieve that.
• The top management of the organization
has to meet a good number of employee
across all level, functions and countries to
seek feedback and provide clarification on
Organizations 2005
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21. Recommendation - To ensure the success out change program “organization 2005”
Shaping the work environment and corporate
culture to fit the strategy.
• The Change should be implemented
globally at a rapid speed
• It requires aggressive plan and executives to
implement the same
• The new structure and work has to be
designed across all global operations,
assignment of people finalized and
communicated and the new organizations
started up on schedule
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22. Recommendation - To ensure the success out change program “organization 2005”
Marshaling resources behind the drive for good
strategy execution and operating excellence.
• An important element should be to give the
great degree of standardizations to the local
management align their own design with
global strategy
• This will give a feeling of independence to
the local management while the global
standard will also be met
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23. - not just strategy but organization -
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